There’s nothing remotely new about software that can illustrate the price points of a stock over a given period of time. That’s as old as a computer that has double-digit memory capacity. But perhaps at no other time in trading history has this software been more necessary, and because of the evolution of technology, more robust and helpful.
Stock charting software is simply a graph that plots the closing prices (and sometimes, using other price criteria, such as openings, highs, lows, median intraday pricing, etc.) over a prescribed length of time. Access is easy and free – virtually any online quote service offers charts with a click of a button, and in periods ranging from a week to five years.
The Old New About Charting Stocks
Charts have been an essential element in technical analysis for decades. They actually go back to the early 18th century, where candlestick analysis was developed, which became the basis for predicting price performance based on the relationship between supply and demand over time.
While other technical analysis theories have evolved the craft – Dow theory, Elliott wave theory, etc. – charting remains the primary visual tool to portray the results of such analysis to a user.
New is Better
What today’s programs do, better and faster than ever before, is incorporate other variables into a predictive mode of analysis. Using volume, general market conditions and even fundamental data as part of the mix, sophisticated charting software can juxtapose conditions on current trading ranges to flag buying and selling opportunities, or at least short-list securities that appear to be on the cusp of a breakout.
They also define and identify the intermediate phases of a stock’s breakout from a range, including flag patterns, candlesticks, lines of support, resistance, channels, pennants or balance days, all of which analysts can use to form a hypothesis that leads to a recommendation.
Getting What You Pay For
Like any software program, these products come in all sizes and prices. Large brokerage and research firms can pay hundreds of thousands of dollars for complex modeling programs, which desktop versions can be acquired for a few hundred dollars to several thousand.
With stock trading, knowledge has always been power. With the use of a solid charting software program, both have been redefined for the average investor.
